An International Climate

Investment Community

– breaking the deadlock

Niclas Ihrén, Senior advisor Climate Change

NEFCO 20th Anniversary Seminar

Helsinki

Nov 11th, 2010

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A transformation to a low-carbon

society 2050 is possible

An energy revolution based on low-carbon technologies is needed to

tackle the climate change challenge. Recent comprehensive studies

show us how.

• IEA, ”Energy Technology Perspectives 2010”

• The European Climate Foundation, ”Roadmap 2050”

• Price Waterhouse Coopers, ”Come Sun, Rain or High Wind”

• McKinsey, ”GHG Abatement Cost Curves”

Conlusions:

• A reduction of CO2 in Europe by between 80-95% by 2050

is possible

• A low-carbon future is a powerful tool for economic

development and energy security

Global reductions to 2050 (IEA)

Abatement Costs (McKinsey)

5 Major areas of transformation

• Improving industrial and domestic energy

efficiency

• Transforming the transport sector and the

building sector

• Reducing emissions through Carbon Capture

and Storage, CCS (?)

• Investing in new energy from wind, hydro,

solar and nuclear

• Investing in a more robust, resilient and pan-

European power transmission system

Transmision system (Roadmap 2050)

Required investment until 2050 (Roadmap 2050)

...But Energy Cost Decreases

Supporting Policy Instruments (IEA)

This is what the ”Global Deal” from

the UNFCCC process should fix

• Determine break-down of reduction targets

• Create principles for measurmement and

follow-up

• Determine incentives for compliance

• Allocate shared funds for mitigation and

adaptation for developing countries

The deadlock is holding back

required investments

Stalled negotiations send the signal to business to

put investments on hold

Business requires stable, long-term investment

signals

Current financial incentives, through emission

trading and taxes, are insufficient stimuli

And yet, Cleantech is identified globally as a growth

market

Who will win ”the green race”?

The EU is the leader in cleantech export

The EU has a comprehensive and ambitious climate strategy

But the UNFCCC negotiations are in a deadlock – not giving momentum to low-carbon investment

Asian countries are determined to win ”the green race” –regardless of a global, legally binding deal

A technology neutral CO2-price:

what is that?

• The present CO2 price level of €15 is too low

to make the dominating fossil technologies

pay the real costs

• To make major low carbon technologies

economically viable, a CO2 price of at least

€40 will be needed

• It should level the playing field between fossil

and low carbon technologies

The IEA and the World Bank

on CO2-pricing

”A stable global carbon price is neccessary to form

the cornerstone of any successful policy in the longer

term” (The Energy Technology Perspective 2010)

”Pricing carbon ... is the optimal way of both

generating carbon-finance resources and directing

those resources to efficient opportunities” (World

Development Report 2010).

A Technology neutral CO2 price – how?

• A political agreement:

Giving direction for the required CO2 price trajectory to drive the modernisation of the energy system

• ETS: The trading system for emissions as the base, revised scheme 2013

• Tax: Complementary carbon taxes as national decisions

An International Climate

Investment Community – how?Five elements:

• Focus on stimulating investment, rather than

regulation of emissions

• A technology neutral CO2-price as a driver for low-

carbon tech

• Strengthen energy efficiency standards

• Building step by step – as Jean Monnet and

Schuman did!

• Governance based on the agreed rules and an

open method of coordination, rather than a global

legal system

A European Initiative

• Should be a European initiative

• Could all 27 EU countries come on

board?

• If not, the Treaty gives a group of at

least nine countries the right to

establish a Community

• Inviting likeminded countries from all

over the world

A concept for discussion -

not a blueprint

• There are a number of initiatives pointing in

the same direction

• Our proposal addresses some key issues, but

not all

• It is a concept, not a blueprint

• Comments, questions and objections are

welcome!

It is all about sensible

risk management

“The issue for policy is how to manage risk,

taking account of strong scientific evidence that the

risks are potentially very large.

These are not small probabilities of something nasty,

but large probabilities of something catastrophic.”

- Sir Nicholas Stern, June 24th, 2010

A suggested Price Trajectory for

CO2